The Loonie is the biggest loser of the week thanks to the one two punch of global risk-off vibes and BOC expectations.
Canadian Headlines and Economic data
- Canadian dollar hits 11-day low as data points to slowing domestic economy
- Canada offers stimulus budget, but may be too little to re-elect Trudeau government
- Federal budget 2019 highlights: 10 things you need to know
- Statistics Canada reports wholesale sales up 0.6 per cent in January
- Canada ADP Non-farm employment at 36.2k vs. 32.9k
- China canola ban remains a headache for Canada
- Canada retail sales drop for third month in a row on weak autos
- Canada annual inflation rate edges up to 1.5 pct in February
- Canada Bonds Due in More Than a Decade Yield Less Than Cash
Major Market Drivers for the Canadian Dollar
Like most other major currencies this week, the front half of the week for Canadian dollar pairs saw low volatility, choppy trade thanks to a light economic calendar and lack of market moving headlines from Canada. Tuesday saw a brief rise in volatility and uniform move higher in Loonie pairs, possibly on the spike higher in oil prices. News came out that OPEC would postpone their April meeting until June, effectively leaving output cuts in place, which is supportive to oil prices. It’s also possible that traders were expecting stimulative measures to be presented in the upcoming release of the Canadian government’s annual budget. It was a move that was short lived as the Loonie quickly changed course as oil fell at the end of the Tuesday session, possibly on risk-off sentiment after news reports that China may renege on pledges it made with the U.S. around trade talks.
Bears were in control for the rest of the week, all despite another spike higher in oil prices (bullish U.S. oil inventories update) on Wednesday and a lack of bearish catalysts from the calendar. The argument could be made that traders don’t see the new budget would stave off the growing expectations that the Bank of Canada is most likely to move lower with interest rates. And this is speculation that’s not only hurting the Loonie but also Canadian bond yields, which recently inverted as the 10-yr yield fell below the 3-month for the first time since 2007. Some view this as a signal that a recession is coming, which supports rate cut speculation and Loonie weakness further.
And it looks like Loonie pairs got one final push lower on Friday after the weak Europe manufacturing PMI numbers sparked renewed fears of slowing global growth, which added more fuel to the growing risk aversion sentiment this week that was likely also driven by the ongoing Brexit drama (didn’t get the longer Brexit extension), and some U.S. negotiators seeing China push back on trade vows. Oil fell on the day as well, so pressure was coming from all angles on the Canadian dollar, pushing it to biggest loser status of the week.